In Need of a Boost to Non-oil Exports

The
latest quarterly Economic Report from the CBN puts non-oil exports
provisionally at US$0.62bn in Q4 2017, indicating a rise of 21% q/q and a
decline of 46% y/y. The q/q increase was attributed to a significant rise in
receipts from agricultural products.

Based
on industry sources, the value of Nigerian agricultural exports to the US under
its African Growth and Opportunity Act increased by 200% y/y to US$9m last
year. The pick-up is commendable but generated revenue still remains low.

The sectoral breakdown shows that proceeds
from agricultural products stood at US$313m in Q4, representing 50.9% of total
non-oil export proceeds.

We note that food inflation has remained
stubbornly high over the past several months. One likely reason, although anecdotal
at this stage, is the increasing preference of farmers to export their produce
as opposed to supplying domestically. In our view, the preference can be linked
to currency depreciation and the attraction of being paid in a convertible
currency (the CFA franc).

A favoured agricultural export is sesame
seeds. Recent reports indicate that global demand for the product has picked
up, with Japan positioned as its leading export destination. This is most
likely due to the growing market for food products such as hummus as well as
sushi in Japan.

To encourage export activities, the CBN has
reintroduced the N500bn export stimulation loan for non-oil producers and
exporters. This was initially introduced in 2015. Additionally, the Nigerian
Export-Import Bank, the country’s export credit agency, has set up a smaller
N50bn intervention fund for the same purpose.

The implementation of the
re-introduced export expansion grant (EEG) has been slow; N20bn was set aside
for the EEG in 2017 budget. For this year, we understand that the FGN has
reduced the allocation to N9.7bn.